What happens if you want to move home but you are sitting on a low rate currently that you want to hold on to?
Let me introduce you to ‘porting’. It’s a term you may have heard before, and many mortgage products are portable to another property – but what does this mean in reality and how does it work?
What exactly is porting?
Porting is an option for those who are looking to move house and want to take their existing mortgage deal with them to the new property.
It allows borrowers to transfer their current mortgage terms, including the interest rate, loan amount, and remaining term, to the new property without incurring early repayment charges or penalties.
A few things to consider about porting…
To port your current mortgage requires the same level of underwriting as a new application.
As brokers, we submit all the relevant documents to the lender as normal and affordability and eligibility are assessed on today’s policies and calculators. However, the lender can look to honour the rate you already have in this application decision.
They would need the new property to be within the same loan-to-value* bracket as the product you originally completed on.
For example, if your current product is based on a rate available on a 75% loan-to-value basis, the new property price and remaining loan balance would need to fit within a 75% loan-to-value bracket or under to be acceptable.
*Loan to value is the percentage ratio of the loan balance compared to the property value.
As standard, the mortgage lender carries out a property valuation for mortgage purposes to check this.
If agreed, the lender will issue a new OFFER with the same terms as your ported product but secured against the new property.
What if you want to borrow more money for the new purchase?
Any additional borrowing will be on a new current rate, that is available on the market on the day of application. Once again, this will be subject to affordability calculations. Therefore, your mortgage will have two parts to it, with the same lender.
Part One will be the original loan that has been ported on the previous fixed rate
Part Two will be the top-up element on a separate rate
It’s usual for the top-up loan to be on different terms and a good mortgage broker will work with you to ensure it’s aligned with your needs.
Speak to broker to get the best advice
We hope this article along with the feature on remortgaging by my colleague Sonya has inspired you to think about your current mortgage and future plans.
If you are fixed into a low rate at this time, you can certainty take this opportunity to prepare for the future in an informed, organised and empowered way. Perhaps you now have some ideas to really make your money work for you.
Your mortgage is the biggest financial commitment you will ever make, and we strongly feel that taking control and fully understanding your mortgage and choices in this way puts you rightfully in the driving seat of your financial decision making.
As always, we encourage you to seek advice and support to negotiate the market and your individual needs in the best possible way.
Gemma Bennett is a senior mortgage broker for The Mortgage Mum
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